Monthly Archives: February 2019

In a previous article, we talked about flat fees, and how they have become the favourite alternative to billable hours for both lawyers and their clients. There are many benefits to flat fees: they are something clients want and like. They eliminate surprises: clients knows in advance how much they will have to pay, and you know how much you will make. And because flat fees usually are (at least partially) paid up-front, lawyers don’t have to worry about getting paid. Knowing in advance how much something will cost also lowers the threshold for clients to hire a lawyer, which means lawyers get access to more clients.

We also pointed out that fixed fees are not always the ideal solution for the services you offer. A prerequisite is that you can determine in advance what services you’ll offer and estimate how much time those will take. Typically, cases that involve opposing parties (litigation, arbitration, mediation, …) may be less suited for value pricing.

We also discussed how there two ways to calculate flat fees. In both cases, your profits consist of your revenue minus your expenses. So, you always have to calculate your expenses in advance. Where they differ, is in how to calculate your revenue. You either use a cost plus model, or value pricing. In the cost plus model, the price is set by calculating the costs and adding a fair profit margin, which can be based on the average time you anticipate you will spend on the case. With value pricing on the other hand, you determine your price based on what the service you offer is worth to the client.

So, how do you set your price? Mark Wickersham is an accountant who wrote a booklet on “Using value pricing to grow your business” that is available for free online. (It can be downloaded here: quickbooks.intuit.com/uk/accountants/value-pricing/). And while it is written for accountants, much of what he writes is relevant for lawyers, too. Here is his take on it.

Before you can actually set a price, you have to determine what it is that you’ll be putting a price on. In other words you have to determine the scope of services that will be covered by your price. This also means you first have to determine what your clients expectations are. In his book, Wickersham dedicated a chapter to five types of questions you must ask to understand a) the scope of the work and b) what your client values. These questions deal with:

Scope

Tangible Preferences

Intangible Preferences

Outcome Preferences

Enhancement Questions

Scope questions have to do with what your client needs or wants from you, and with what the client values. Scope questions help us understand the client’s circumstances, which in turn helps us to estimate the amount of work we will need to do. Scope questions also help to establish what the client values. As you get more proficient with value pricing you’ll get better at asking great questions that help to uncover what a client really values.

Tangible Preferences have to do with the list of services you could offer your client that he might want or value. Basically, you offer a menu of services that you go over with the client, and that are relevant to his or her situation. When clients say “Yes” to these things, they indicate they would value them. So you add them into your price, even if the time to deliver these extra things is zero.

Intangible Preferences have to do with the user experience of the client. These are questions that help establish the modalities of cooperation, and look at how to best work together. These include questions, e.g., like “who is contact point?”, “what are the preferred modes and preferred frequency of communication (when does the client want a phone call, a mail, a letter or a meeting)?” Does the client want any evaluation meetings during or after, etc?

Outcome preferences focus on what outcome the client wants. This is where we look at the end result. We discuss desired as well as possible alternative outcomes and how to respond.

Enhancement Questions deal with how we can further enhance the client’s experience. This is an advanced and optional step that focuses on additional services that are not necessary but which the client may value.

Once we have the answers to these questions, we can start determining our optimal price. To do this, Wickersham says that we must forget the timesheet. Instead, we must focus on four factors or benefits that help determine what our services are worth to the client. These factors are:

The direct financial gains for the client, which typically means increased wealth or income.

Reduced risks

Decreased liabilities

Enhanced reputation

Wickersham: “By effectively communicating these forms of value to your clients, you can maximize your prices, while still creating a win-win scenario where your clients are able to profit from the relationship as well. And that is the key to both satisfied clients, and a healthy business. (…) Once you understand what they value (the pain they are trying to avoid and the gain they are trying to achieve) you present a high price, not because you expect them to say ‘Yes’ (if they do, you’re too cheap!), but to create a reference price. This is called anchoring.”

Wickersham also offers additional suggestions. He advises to present the client with options to choose from. “When your first price is too high, this is where all those preference questions come in. When you give clients choices they often say ‘Yes’ because they haven’t yet seen the price. If the price is too high, you can now ask the client the following: ‘The reason this is the price is because you’ve said you want all of these things. Looking at this list of things you’ve said you’d like, are there any here that on reflection you don’t really need (value)?’ ”

In short, value pricing optimizes profits, but it is not easy. Some call it an art, and with practice, one becomes more proficient at finding the correct win/win price to charge.

The beginning of a new year is traditionally a time when the experts make their predictions for the year to come. The field of legal technology is no exception. Most of the predictions focus on Artificial Intelligence (AI), blockchain and security, but there also are predictions with regard to the legal market in general, the cloud, and eDiscovery. Let’s have a closer look.

Legal Market

The American Bar Association’s 2018 Legal Technology Report revealed that in 2018 fewer law firms invested in legal technology than in 2017. Because of this, experts expect a stagnation in the amount of law firms who are investing in legal technology. The amount of money being invested by law firms still is increasing, as is the amount of money being invested by legal technology solution providers. The legal technology market itself is therefore expected to keep on expanding.

Experts do not anticipate significant changes in the software and services that the lawyers are using, nor in how law firms are charging their clients. The market of Alternative Legal Services Providers (ALSPs) will keep on growing, and some of these Alternative Legal Services Providers will come into their own as major players.

Artificial Intelligence (AI)

IBM predicts three major breakthroughs in the field of AI which will lead enterprises to increasingly advance, scale, and trust artificial intelligence. These three breakthroughs are:

Causality will increasingly replace correlations: at present Machine Learning algorithms discovers patterns, i.e. correlations, but the nature of those correlations still hasn’t been qualified. The breakthrough will consist in qualifying those correlations and determine what is cause and effect.

Trusted AI will take centre stage: methodologies are being developed for a better cooperation between humans and AI, where humans can trust the output generated by AI systems.

A Move Towards “Transparent AI” (i.e. where AI systems can reveal how they draw their conclusions. This ties in with the concept of “trusted AI”, mentioned above).

AI and automation are drilling deeper into every business

More jobs will be created by AI than will be lost to it.

AI assistants will become truly useful

In a separate article, other experts predict a rise in applications that combine video, voice and AI to improve human interactions, sales, customer service, and meetings.

More specific to the field of Legal AI, experts predict an increase in smart contracts, as well as an increased use of blockchain based solutions. Law firms are becoming smarter in what technologies to use, which leads to a higher adoption of legal AI: AI will augment existing solutions. AI is also expected to play a more important role in the design of legal software and its interfaces. One expert predicts that the increased usage of AI will lead to lower fees, thus facilitating access to justice. One of the fields that is expected to grow is legal analytics (including judicial analytics). As a result of this the roles of Chief Analytics Officer (CAO) or Chief Data Officer (CDO) will become more prevalent in law firms.

Cybersecurity

A lot of the predictions have to do with cybersecurity. Law firms have a lot of valuable data and are prime targets for cybercriminals.

One of the world’s foremost experts in building AI systems to detect malware points out that cybercriminals have started using what he calls “offensive AI”, i.e. AI systems that are specifically designed to attack computer systems. As a result, malware, e.g., gets smarter and better at evading protection against it. In turn, cybersecurity companies are increasingly using AI as well to ward off cyberattacks and to detect those technologies that are aimed at evading protection.

All experts anticipate cybercrime will rise in 2019. They expect increases in:

Data breaches and data leaks, with an emphasis on the latter

Browser crypto-mining, or crypto-jacking, i.e. where your browser is hijacked to mine cryptocurrencies

Web skimmers: just like you have hardware to illegally clone credit cards, web skimmers use websites to illegally get your credit card details

Expert specifically expect an increase in botnets that use “Internet of Things” devices

Dedicated Denial of Service (DDos) Attacks

Ransomware

Financial crime, i.e. cyberattacks on banks and other financial institutions

Email social engineering attacks, also known as BECs, or Business Email Compromises

Exploit kits, i.e. web-based applications that redirect users to malicious sites where they attempt to exploit a browser vulnerability to infect the user with malware.

Cloud servers, too, are in trouble in 2019. Cloud servers have slowly become the favourite target of cryptocurrency mining trojans.

As more and more hacking tools are becoming available, experts foresee an increase in underground communities of hackers and cybercriminals.

Malvertising will continue to gain sophistication in 2019.

Cloud

Over the last years, law firms have increasingly started using cloud technologies. That growth is expected to continue, as law firms have largely overcome their hesitance to use cloud-based solutions.

eDiscovery

The GDPR has had a great impact on legal eDiscovery. As more and more countries (and States within the US) are implementing similar legislation, experts believe we are reaching a tipping point for the protection of personal data privacy in legal discovery.

2019 will also see new ways to exploit the power of analytics across the entire e-discovery workflow. ‘Active learning’ will be used as a supplemental tool to support traditional reviews. And as eDiscovery requires data transfers to service providers, those transfers will increasingly become targets for hackers and cybercriminals.

We are also witnessing an increasingly globalized eDiscovery, and as a result there will be an increase in demand for translations.

Blockchain

In 2019, we will approach Blockchain more realistically. Many fantastic visions of 2017 and 2018 were a little ahead of schedule, and many projects have failed to deliver. With a more realistic approach, Blockchain will finally move past the hype into reality and Blockchain adoption is expected to spike across sectors, and to start converging with the Internet of Things (IoT).

Security experts anticipate that Blockchain will help prevent unauthorized access. They also see advancements in privacy-preserving techniques for blockchain: these techniques combined with blockchain can enable new decentralized applications that protect data while providing users with transparency and control over how data is used.

To address the issue of energy consumption costs, which are skyrocketing because of the computing power needed, in 2019 we will also see hardware-based acceleration of cryptographic techniques.